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Brazil: Summary of the Bill That Regulates the Outsourcing of Services and Changes the Temporary Employment Contract’s Regime

24 March 2017

Tauil & Chequer Legal Update

PL No. 4.302/1998

On the evening of March 22, 2017, Brazilian Federal Chamber of Deputies approved the Bill no. 4.302/1998, which seeks the regulation of services provided through outsourced manpower (“terceirização”), as well as changing the legislation regarding temporary employment.

Although the aforementioned Bill is pending sanction by the President of the Republic – who can even veto it, totally or partially – we indicate below the main points contained in the draft of the text approved by the Chamber, which was not yet published on the Official Journal, as follows:

About the Temporary Employment Contract:

Possibility of using the temporary employment contract in order to meet the so-called “complementary demand of services” (understood as the demand resulting from: unforeseeable factors; when foreseeable, factors that are intermittent, periodic or seasonal in nature; or, even in order to replace employees on strike, when the strike is considered illegal or abusive);

extension of the maximum duration of the temporary employment contract for up to 180 days, consecutive or not, and that may be extended up to 90 additional days, consecutive or not;

in the event of termination of the period, the temporary worker may only provide services to the same contractor after 90 days from the end of the previous contract;

minimum share capital requirement of BRL100,000.00 for registration of the temporary employment agency;

requirements for the validity of the contract between the temporary employment agency and the contractor: (i) qualification of the parties; (ii) justification for temporary work; (iii) term of service; (iv) value and; (v) provisions about health, hygiene and safety of the workers;

for temporary employees hired for up to 30 days, it is possible to establish a system of direct payment of the installment fees to the Severance Indemnity Fund (FGTS), proportional vacations and proportional Christmas Bonus (13th salary);

subsidiary liability of the contractor for non-compliance with labor rights relating to the period in which the work occurs.

About the Outsourcing of Services (“Terceirização”):

the impossibility of forming an employment relationship between the workers, or partners of the companies that provide services, whatever their line of business, with the contracting company;

minimum capital share requirement (ranging from BRL10,000.00 to BRL250,000.00, according to the number of employees) for the company to provide services;

the possibility of outsourcing all activities of the contracting company (both the so-called “supporting activities”, as well as the “leading activities”);

the responsibility of the contracting company to guarantee the safety, hygiene and health conditions of the workers, when the services are rendered on its premises, or place previously agreed to in contract;

the contracting company may extend to the contracting company’s employees the same facilities of medical, emergency and meal services for its employees on the premises, or in a place previously agreed to in contract; subsidiary liability for labor and benefits obligations related to the period in which the services are rendered;

requirement for the validity of the contract between the services-taking and the services-providing companies ((i) qualification of the parties; (ii) the justification for the outsourced work; (iii) term of delivery; (iv) value and; (v) provisions about health, hygiene and safety of the workers).

The decision on this Bill by the President of the Republic is still pending, and to repeat, may be partially or totally vetoed.

In addition, it is important to note that there is another Bill currently being drafted in the Federal Senate (PL 4.330/04), that was already approved by the Chamber of Deputies, and also concerns the outsourcing of labor. If approved, this second Bill will allow the Executive Branch to select the legal provisions to be vetted on either Bill.

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We emphasize that our labor department’s team is available to resolve any doubts and to clarify the Bill in question, as well as relevant matters related to it. We are also on hand to evaluate and seek measures to minimize the practical impacts that the future law, under the terms in which it is sanctioned, may cause.

Observations in this update about Brazilian law are by Tauil & Chequer Advogados. They are not intended to provide legal advice to any entity; any entity considering the possibility of a transaction must seek advice tailored to its particular circumstances.

Mayer Brown is a global services provider comprising legal practices that are separate entities, including Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated (collectively the “Mayer Brown Practices”), and affiliated non-legal service providers, which provide consultancy services (the “Mayer Brown Consultancies”). The Mayer Brown Practices and Mayer Brown Consultancies are established in various jurisdictions and may be a legal person or a partnership. Details of the individual Mayer Brown Practices and Mayer Brown Consultancies can be found in the Legal Notices section of our website.

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